Moody’s Modifies Ratings of Mexico’s Major Institutions

Moody’s announced rating changes for both Mexico’s Petroleos Mexicanos (PEMEX) and the Federal Electric Commission (CFE) after revising the country’s financial outlook.

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CFE’s Outlook is Currently Stable

Moody’s assigned Mexico’s CFE a stable rating after analyzing its baseline credits and dependance on the government’s financial support. The all-around analysis also considered Mexico’s recent downgrade to Baa2 and the MX$582.3 billion (US$27.94 billion) included in Mexico’s capital investment plan for 2022-2026.

PEMEX Receives Downgrade from Moody’s

Moody’s changed PEMEX’s rating, linking the change to the government’s financial strength and support. It also considered PEMEX’s high debt maturities and continued negative free cash flow were also considered. The oil giant might need large amounts of external funding in the future.

The Importance of Selecting Between Equity and Debt

Understanding the difference between equity and debt is essential to the optimal operation of a company, said Fernando Padilla, CEO and Founder, Pretmex y Landera.

“There are two ways to raise capital for a company (besides the money injected by each of the owners). The first is through debt, which means "borrowing" from someone else, mainly financial institutions, or through equity, which basically means selling part of the company to a third party, which can even be friends and family. The second option is through an investment fund or crowdfunding that invests in the company, injecting resources in exchange for a shareholding in the company,” said Padilla.

Automation is Vital Despite Payment Digitalization

Digitization and technological implementation are vital to reduce human error and address the most complicated operational procedures, said Nathan Schorr, CEO, Flexio.

“Today, investment in technology is essential for companies and is part of the necessary change processes that each business must carry out,” said Schorr.

Inflation Might Lead to Recessions

A US recession would undeniably affect Mexico, considering the dependance of the Mexican economy on the US. But some experts say that Mexico’s adequate performances in certain sectors could protect the country.

“When Central Banks start to realize that they cannot contain inflation without having a major impact on economic growth, then we will see a change in rhetoric, but until then, we do not think they are necessarily successful in containing inflation,” said Jose Luis Ortega, Head of the Debt and Multi-asset Teams, BlackRock.